Performance Pay Perils

At a hearing on Feb. 12, the House Oversight and Government Reform Subcommittee on the Federal Workforce questioned the administration's efforts to scrap the decades-old General Schedule pay system and replace it with agency-specific performance-based pay systems. Much of the hype surrounding new systems at agencies such as the Defense Department has focused on the rank and file. But at least one critic noted that SES performance pay hits many of the same snags as other experiments. Carol Bonosaro, president of the Senior Executives Association, told lawmakers that SES performance pay has resulted in a host of problems, ranging from low morale to a hastening of the retirement wave. Salary increases for executives are lower than General Schedule raises, a problem compounded by a pay cap of $172,200, she said. "If the Executive Schedule had kept pace with the national comparability increases provided by the General Schedule, the 2008 cap for SES pay in certified agencies would be $226,859, not $172,200," Bonosaro said. The performance pay system increases the potential for politicization, she said, and allows agency officials to lower ratings recommended by lower-level supervisors. The SES pay system covers about 6,000 career executives, far fewer than many other pay-for-performance systems across government. But much is at stake, largely because many view it as the potential archetype for the rest of government. In January, the Office of Personnel Management surveyed senior executives to gauge the implementation and perceptions of executive pay for performance. Bonosaro commended the agency for conducting the survey, but she noted concerns about its scope in a Jan. 14 letter to OPM Director Linda Springer. "Given the coming executive corps 'retirement tsunami' … this survey offered an important opportunity to ask senior executives their views and experience with regard to the interest of high-performing GS-15s in entering the SES," Bonosaro wrote, noting that several important subjects were omitted from the survey. The results have not yet been released. At the hearing, Bonosaro offered up potential solutions to SES's pay troubles, unveiling proposed legislation that would improve pay and performance management for federal executives. The proposal would require a minimum market adjustment for employees who receive a rating of "fully successful" or higher, ensure that employees receive notification and feedback on ratings, and guarantee a minimum increase of 5 percent for new senior executives promoted from the General Schedule. The proposal also would require the inclusion of executive performance awards and retention allowances into an employee's high-three average salary calculations for retirement and would modify the way OPM certifies agency performance pay systems for SESers. "It is imperative for Congress to take a hard look at the risk, pay and incentives in the current SES pay-for-performance system," Bonosaro said. "This system is not attractive and will continue to dissuade many of the best employees from aspiring to the highest ranks of the career civil service." SEA's proposal addresses the concerns of many employees in other performance-based pay systems, who would undoubtedly take Bonosaro's recommendations in stride. The Bush administration has expressed no intention of funding performance-based pay systems beyond current levels. And with SEA's proposals likely involving hefty costs, it's unknown whether the recommendations could be implemented. According to public policy professionals, a lack of funding often is a major contributor to failed pay-for-performance attempts. "Predictably, nothing has so surely and intensely diminished employee acceptance of the administration's pay-for-performance systems as the administration's rollout of those systems without new funding for performance-based raises," Charles Tiefer, professor at the University of Baltimore School of Law, said at the hearing. Based on the title of the hearing -- "Robbing Mary to Pay Peter and Paul" -- it looks like subcommittee members are intent on cracking down on pay for performance, especially its alleged potential for subjectivity and bias. "Before the end of this year, we have to find a way to roll back pay for performance, so we do not subject ourselves to inevitable litigation or lose federal employees at the height of when we're trying to keep them," said Del. Eleanor Holmes Norton, D-D.C. It will be interesting to see what impact the final months of the 110th Congress will have on pay for performance, and how new national leadership will move on the concept, if at all. pbw